After a so-so 2012, Cleveland's real estate market is poised for big things this year

The Cleveland real estate market continues to evolve with signs of progress and excitement on the horizon. As our regional and national economy keeps gaining momentum, these local signs of hope allow us to proceed confidently in the promise that recovery and expansion are upon us.

The last 12 months represented a solid, if unspectacular, year in local commercial real estate. The year witnessed a few noteworthy events, including the transformation of the Higbee building into the Horseshoe Casino Cleveland, which has attracted solid and consistent crowds to Public Square, as increased weekend parking demands attest.

Just north of the Horseshoe, the Medical Mart rose not only physically but also in stature, as potential competitors in New York and Nashville ground to a halt, thus helping to raise the MedMart's profile nationally. The announcement of a number of high-profile tenants served to further demonstrate the viability of the project.

Finally, the stylistic Uptown project and neighboring Museum of Contemporary Art signaled the burgeoning growth of opportunities and jobs around University Circle.

The coming year holds promise of further development and advancement for our city. This summer, the opening of the MedMart should be realized, solidifying Cleveland's spot as an international healthcare destination. Only blocks away, the first phase of the Flats East Bank project, including Cleveland's first new, significant office building in years, should be completed, as well.

New openings will not be the year's only highlights, as development of the health care corridor by institutions and the private sector is expected to continue along Euclid Avenue. University Circle will remain a constant zone of construction as, among other projects, the second phase of Uptown gets under way, adding much needed residential and retail space to the area. Finally, the anticipated redevelopment of the Ameritrust complex, announced in the waning days of 2012, should be a project of focus for 2013 and beyond.

Foundational elements of the real estate market also point toward positive prospects.

The lending market, both at the mini-perm and permanent levels, remains active, as underwriters look to responsibly ease lending standards and get deals closed. While money is by no means easy to come by, properly structured and leveraged projects are likely to find multiple financing options available.

According to several local real estate professionals, retail leasing activity has picked up across the region. Higher traffic areas are seeing fewer vacancies, increased absorption of vacated spaces and rents trending higher. Moreover, as has been the case for the past several years, the residential rental market remains strong.

The central business district and near West Side continue to show particular strength from a residential perspective, with especially low vacancy rates. The conversion of the (former) Embassy Suites at Reserve Square back to apartments is clear evidence of the continuing demand for downtown housing.

As we are still emerging from a recession, all signs are not pointing upward.

The need for improved circumstances in certain segments of the real estate market remains. For example, the vacancy rate for office space — downtown and in select suburban centers — remains higher than most would prefer. While some buildings have recovered from tenancy losses (notably 200 Public Square), high vacancy rates persist in other nearby buildings.

Even with this year's expected openings of the Aloft Hotel on the East Bank and the reflagged Westin Hotel on St. Clair, there remains a glaring shortage of downtown hotel rooms, at least to the extent necessary to support larger scale meetings which the Med Mart might attract.

So, bottom line, where are we? The market remains active and moving forward. Construction cranes and vehicles seem to be in constant motion and demand across the city. The recovery continues, but greater capacity could be had in some areas. Any way you look at it, 2013 should prove to be a lucky year in the fortunes of Cleveland's real estate industry.

Geoffrey S. Goss is a partner in the Real Estate Practice Group of Cleveland-based Walter & Haverfield.

Geoffrey S. Goss is a partner in the Real Estate Practice Group of Cleveland-based Walter & Haverfield.